Life Cycle Costing a Code of Practice. Key messages and critical evaluation

Transcription

1 Life Cycle Costing a Code of Practice. Key messages and critical evaluation Andreas Ciroth, David Hunkeler, Walter Klöpffer, Tom Swarr, Hanna Pesonen, LCA XI Chicago, October 2011

2 Outline 1. Background: Why environmental LCC, history 2. Key messages from the recent Code of Practice for Environmental LCC 3. (an attempt for a) Critical evaluation 4. What s next?

3 1. Environmental LCC, Background

4 LCC: Assessing all costs related to a product, over its entire life cycle Broadly used in industry Especially long living goods with an interesting use phase Railway vehicles Buildings, chemical plants Cars First reported use worldwide in the US, DoD, in a tractor delivery contract, 1930 s

5 Examples for LCC application in industry

6 Why Environmental LCC? Cost information for the entire life cycle is often useful in combination with (environmental) LCA. ecomomic and environmental impact of a product eco-efficiency approaches There are many different ways to perform an LCC; in combination with LCA - avoid double-work - avoid double counting, overlaps, gaps Environmental LCC: A method designed to be used in parallel with (environmental) LCA efficiently and consistently.

7 History: SETAC LCC Working Group Hunkeler, D., Rebitzer, G., Lichtenvort, K. (edts.): Environmental Life Cycle Costing. Lead authors: Ciroth, A.; Hunkeler, D.; Huppes, G.; Lichtenvort, K.; Rebitzer, G.; Rüdenauer, I.; Steen, B., Setac, Taylor & Francis 2008

8 History: SETAC LCC Working Group Hunkeler, D., Rebitzer, G., Lichtenvort, K. (edts.): Environmental Life Cycle Costing. Lead authors: Ciroth, A.; Hunkeler, D.; Huppes, G.; Lichtenvort, K.; Rebitzer, G.; Rüdenauer, I.; Steen, B., Setac, Taylor & Francis 2008 Working group started 2003; first complete version of document available 2006

9 History: SETAC LCC Task Force Aim: Further condense the work of the Environmental LCC Working Group Write a Code of Practice similar to the SETAC LCA Code of Practice Members: Tom Swarr, David Hunkeler, Walter Klöpffer, Hanna Pesonen, Andreas Ciroth, Robert Pagan, Alan Brent

10 Swarr, T., Hunkeler, D., Klöpffer, W., Pesonen, H.-L., Ciroth, A., Brent, A. C., Pagan, R. (2011), ISBN SETAC press. In the US 5$, in Europe ca. 30 due to customs taxes (!)

11 2. Vorstellung Code of Practice von SimaPro for Environmental LCC: Key Messages

12 LCC CoP: Key Messages A definition for LCC, including a definition of what is assesssed as cost LCC modeling structure parallel to an LCA Functional unit System boundary Time and discounting Allocation

13 What is Environmental LCC Life Cycle Costing summarizes all costs associated within the life cycle of a product that are directly covered by one, or more, of the actors in the product life cycle (e.g. supplier, producer, user/consumer, End-of-Life actor).

14 What is Environmental LCC Life Cycle Costing summarizes all costs associated within the life cycle of a product that are directly covered by one, or more, of the actors in the product life cycle (e.g. supplier, producer, user/consumer, End-of-Life actor).

15 What is Environmental LCC Life Cycle Costing summarizes all costs associated within the life cycle of a product that are directly covered by one, or more, of the actors in the product life cycle (e.g. supplier, producer, user/consumer, End-of-Life actor). Costs are the monetary value of goods and services that producers and consumers purchase (real money flows)

16 What is Environmental LCC Rebitzer, G., Hunkeler, D Life cycle costing in LCM: Ambitions, opportunities, and limitations Discussing a framework. Editorial, International Journal of Life Cycle Assessment 8(5):

17 LCC modeling structure parallel to an LCA ISO as reference used when writing the CoP Also the phases are the same: Goal and scope Life Cycle inventory & impact assessment Interpretation (albeit a cost inventory usually is also the cost assessment)

18 Functional unit Functional unit is a central concept for Environmental LCC, just as in LCA. For an Env. LCC, the functional unit shall be defined in a similar manner as for an LCA When Env. LCC is meant to be conducted in parallel to an LCA, the functional unit needs to be identical. (otherwise, no consistent overall result)

19 System boundaries System boundaries need to be clearly defined and documented When Env. LCC is meant to be conducted in parallel to an LCA, system boundaries for both need to be equivalent. (NOT identical!) (e.g., R&D relevant for costs, EoL relevant for the environmental impacts)

20 Perspectives, and cost types An LCC reflects the perspective of one or several life cycle actors An LCC creates a Cost Breakdown Structure (CBS) for the product This CBS structures elements of the product under study, for each life cycle stage considered, in different cost types The cost types depend also on the perspective

21 Time, discounting

22 Time, discounting In (conventional) LCC, time is usually considered, especially for long-living goods If it is considered, then costs are usually discounted While in LCA, time is usually ignored Application: P(T) = 1/(1+r) T With: P(T): discount factor; a future cash flow multiplied with P yields the value of a present cash flow; r: Discount rate (usually in [%]) T: Time units (usually years)

23 Application: P(T) = 1/(1+r) T With: 1.2 P(T): discount factor; a future cash flow multiplied with P yields the value of a present cash flow; r: Discount rate (usually in [%]) T: Time units (usually years) P(T), r = 0.00 P(T), r = 0.01 P(T), r = 0.05 P(T), r = 0.10 P(T), r = T [years]

24 Time, discounting, example: Study on German train component, to be operated 30 years annual life cycle costs [ ] traction-related energy costs [ ] climate change potential [kg CO2-equiv.]

25 Allocation Allocation (assignment of burdens to more than one product) is a very common problem in LCC, and often decisive CoP: - avoid allocation; - reduce the amount that needs to be allocated (Activity based costing instead of other cost accounting methods); - specialty: Often no direct material flow between processes that need to be considered in allocation (insurance rate for production building)

26 Allocation - speciality: Often no direct material flow between processes that need to be considered in allocation (insurance rate for production building)

27 2. 3. Attempt Vorstellung for von a critical SimaPro evaluation

28 CoP: Critical Evaluation, 1 CoP proposes an LCC approach that fits to (environmental) LCA. This is a large step forward, and possible without deforming LCC. It is needed since there are many LCC approaches, with often very different results when applied, and LCC is usually applied not in LCA-context The CoP is short and general. It tries to illustrate ist points by case studies, but often does not give a final recommendation This is good and fully justified (we think) since the final decision needs to be flexible and fit to a specific case

29 CoP: Critical Evaluation, 2 However, Costs are not natural science figures, but percieved value. When applied in the context of LCA, LCC results are often too easily accepted. Probably more guidance is needed on how to collect data for LCC, and how to quality-asssure, and review, an LCC study in the context of LCA We invite everybody to apply the LCC CoP, and to report about the experiences!

30 2. 4. Vorstellung Environmental von LCC, SimaPro what s next

31 What s next (some say that) the LCC Code of Practice is suitable for a standardisation Eco-efficiency standardisation is ongoing but almost complete; costs are one part but how to perform the cost assessment is not detailed in the draft standard leaves room On the other side, more guidance on data collection and quality assurance, review for environmental LCC is needed

32 Many thanks. Dr. Andreas Ciroth GreenDeltaTC GmbH Berlin